The warning will add to growing fears about fragile house prices after values dropped by their ever biggest monthly amount in September.
The massive job cuts in the public sector and the squeeze on household budgets announced by the Chancellor this week are expected to make it even harder for buyers to secure finance. The Bank revealed yesterday in its Trends in Lending report that lenders expect house prices to “remain little changed or to decline slightly in 2011”. It said mortgage approvals had been lower than expected recently amid a lack of confidence among home buyers and “uncertainty” about the effects of Government spending cuts. Lenders do not expect a significant improvement in the number of mortgages approved for those buying a new home before the end of the year, with approvals to fall or remain “broadly unchanged”, it said.